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Thank you for your invitation, however to answer your question I need to know the following questions:
1. Do you have a valid offer from that supplier with the agreed prices?
2. If the answer of the1st question is YES, then based on that did you issue any PO for the supplier which was accepted by supplier?
3. Do you have a contract with the supplier based on his offer?
In my over 20 years experience in Procurement and SCM, I have come come across a few suppliers who had to resort to holding the goods even after the payment had been done. Firstly, I would suggest to analyse the situation and the circumstances and try to negotiate because this is what we do all the time. There are many variables but it will depend on your skills in resolving the situation and come to a settlement which works best for both. After all you need to goods and further delay should be avoided. In case of a dead end, going the legal way maybe the last resort but this will delay the results that you expect. So negotiation is the key.
If payment of goods was made against an agreed price then the transaction would be deemed in favour of the recipient. If there is evidence to support the claim, then there is every right to launch legal actions.
Actions would be dependant on the relationship with the supplier and the reasons for with hold ing the goods.
I would also suggest that an alternate sourCe of supply be found.
Normally supplier in Collabrative Supply Chain not doing such activity as they have clear visibility and information the crucial requirement of Production/Operation department. These scenario come under where a key product supplies required by limited supplier who have some sort of monopoly in the market or working with competitors.
The best solution is to have a descriptive meeting with supplier understand the his view point why the price need to raised either it is because if some additional taxes imposed by local Government or some import duty changes. Review and analysis the cost detail provided by the supplier favoring the changes in price and resolve or compensate it in next order and try to maintain safety stock by ordering some additional inventory keeping in view the monthly requirements of Production / Operation. Negotiation is the best output in such situation.
Supplier is bound by his quote he has given so i will see to it that the goods are released, becuase the price would have be stipulated in the quote requested.
Which is very important to obtain the quote prior to ordering
What I usually do is to first inform the Account Manager who handles the project related to the order. Then ask his advise of what to do because his project will be the first to be affected by the changes in price. Then upon his advise, I will act accordingly.
Taking into account that the order has been through all the normal and legal steps; meaning offered, accepted, placed the final order and its conditions have being approved.
I would consider: First trying to reason with them that there is no way to retracting and make them understand how would that not professional proceeding affect them, try to gain the time since it is an Urgently needed material.
Meanwhile, I would have started searching for an alternative supplier and buy from them making sure that quality is the same, price is equal to the original or they have a lesser cost than the change that the first company is trying to impose, and after informing the legal department for all the damage they have cost us, I would go ahead with the buying.
Additionally, I would place a note regarding how untrusting and unethical is the delinquent offerer.
In this case, one should revise agreed contract with the supplier and act a accordingly. Since the order is urgent, an alternative win-win situation must be negotiated with the supplier.
In a healthy business environment, there is the least chance of said scenario.
If such a situation arises, negotiate with the supplier, try to convince them with the future business between both firms and offer him to consider buying their other product too.
I agree with most of the solution provided by our
distinguished readers. I would have a slightly different take
on this matter.
Firstly, as a seasoned supply chain professionals, we do face
these challenges from time to time.
• End User did not indent the item in time, for Procurement
to take actions.
• Due to broken communication between internal
departments, the requirement never reached to Procurement
Department.
• There is a sudden breakdown of a critical machine, and for
which no spare parts are available in the stores.
• The supplier may have been asking for a price increase for
a long time, and which is ignored by the procurement team
and management.
• The supplier may have substantial receivable and payments
are delayed consistently.
• To deal with the current crisis, speaking to the supplier is
the best possible choice.
• The Procurement executive should find out what is the
basis of the current behavior of the supplier.
• The situation tilts towards the supplier, if it is a single
source or an OEM, and is situated in the distant location.
• If the procurement manager fails to resolve the issue.
• Management would come into the picture and more often
than not the situation is controlled and supplier agrees to
supply at the mutually agreed value in the Purchase order.
• Normally at that point in time management also pushes the
procurement team to find an alternate source.
• If all the efforts fail to control the situation, management
would give one-time approval to pay the additional cost.
• Procurement team should be in sync with Stores,
Production, and Maintenance.
• There should be a written contract between the supplier
and the company, as some of the conditions are not covered
in a standard purchase order. A contract may have covered
us in such a condition.
• Believe me, all suppliers are not equal, so such critical
suppliers must be segmented and improving the relationship
with them should be a priority.
• Buyers should not fool the suppliers about the price
increase and should have more transparency dealing with
them.
• Management should review the organization structure, and
make necessary changes, so that information sharing
becomes easier.
Firstly this is Business ethics. If the order is crisis, must be taken. If this is intentional of supplier,then depending of market,this supplier may be eliminited.
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